Establishing healthy money habits is a process that should be taught early in order to be most effective. But, it can be difficult to know what to teach children, especially when they’re very young. Most money experts advise that children be given some spending money or a regular allowance to help them learn how to budget and plan for wise spending and saving. But, as children get older, it’s also important to teach them about healthy financial habits that can keep them out of debt once they’re old enough to have their own credit cards and other loans. Unfortunately, those are lessons that many parents haven’t had themselves. So, how can you make sure the lessons you teach your children will help them develop strong credit management skills? Here are a few tips:
- Make sure your kids understand that credit cards aren’t truly cash, but they are loans that must be paid back. Credit cards should be used only when you’re able to pay them back in full by the time the next bill arrives.
- If you can’t pay back your credit cards by the time the bill arrives, your purchases will end up costing more – sometimes much more. If you make only the minimum payments on the money you owe, that $30 video game you charge now could end up costing you $60 or more if you don’t pay it back right away.
- Credit cards are helpful for establishing a good credit history – as long as you use them wisely. Your credit history lets lenders know how good you are at paying back your debts on time. A good credit history is important for later life when you may need to borrow money to buy a car or a house. Without a good credit history, you may not be able to buy those things, or they may end up costing much more money over time. If your credit history is damaged by bad credit habits, it can take years to improve it.
- Credit cards have other benefits over cash for some situations. For instance, if you lose your credit card or the card is stolen, your credit card company can keep the person who stole it from accessing your money.
- Not all credit card debt is bad. Many people could not own a home or a car without a loan. The key is to pay your debts on time, all the time, and that starts by building a good budget and saving money regularly so you can pay cash as often as possible.
Finally, set a good example and practice what you preach. If you’re carrying a lot of debt and you long for the day when you’re debt free, enroll in a credit counseling and debt consolidation program and get the help you need to reduce interest rates and establish a payment plan that is affordable and easy to follow. Credit counseling and debt consolidation programs provide powerful tools and guidance to help you get your financial life in order. It doesn’t take a big commitment of time, but the effort you put in can yield huge benefits in a relatively short period.